Mortgage Rates Rise While the Bank Holds: The Swap Rate Story

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Mortgage Rates Rise While the Bank Holds: The Swap Rate Story

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UK mortgage rates rose meaningfully in May 2025, yet the Bank of England held its base rate at 3.75%. That gap — between what the Bank decided and what borrowers were actually quoted — is the story this episode unpacks.

Fixed mortgage rates don't track the Bank Rate directly. They track swap rates, which reflect lenders' own borrowing costs and where financial markets expect rates to head. In May, swap rates surged over 60 basis points, driven by escalating Middle East tension and what that means for oil prices. The Bank stayed still. The markets moved anyway. Your mortgage rate went up.

This episode walks through the full picture: why Governor Bailey's language about a 'stronger monetary policy response' is not ambiguous, why markets are already pricing in two rate hikes in 2026, and why the difference between a manageable inflation peak of 3.6% and a return to 6.2% inflation essentially hinges on a four-dollar move in oil. The Strait of Hormuz, stagflation, and the Bank's own downgraded growth forecasts all connect directly to decisions UK households need to make right now.

On the practical side: what the fix-or-float question actually looks like today, why easy-access savings rates above 4% remain worth locking in, and what to watch ahead of the June MPC meeting. Clear, calm, and built for UK households who need signal, not noise.

This episode includes AI-generated content. A YesOui.ai Production.

This episode includes AI-generated content.

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